Drafting Waiver-of-Liability Agreements in Wisconsin: It’s Not Getting Any Easier

May 16, 2013 – In April, the Wisconsin Court of Appeals issued a decision that has implications for all businesses and organizations that use waiver agreements in Wisconsin. In Brooten v. Hickok Rehabilitation Services, the court of appeals held void a waiver agreement that had been signed by an individual who joined a health club, who subsequently was seriously injured when a weight bench he was using collapsed under him.1

Relying primarily on the Wisconsin Supreme Court’s seminal 2005 decision in Atkins v. Swimwest,2the court held that the health club’s agreement form was contrary to public policy and therefore void based on three factors: 1) the form used provided no opportunity to bargain; 2) the agreement was overbroad; and 3) the agreement “exceeded the contemplation of the parties.”3 While generally following the decision in Atkins, parts of the decision in Brooten go beyond Atkins, and may establish an even higher standard for those businesses and organizations that want to use waiver agreements.

No Bargaining Opportunity

As to the “no opportunity to bargain” factor, the agreement form was completely silent as to the issue of bargaining.4 As in Atkins, the court indicated this was a “significant factor” suggesting a violation of public policy.5 Again as in Atkins, the court offers no guidance as to exactly how “the form itself must provide an opportunity to bargain.”6 That lack of guidance continues to provide significant challenges to drafters and users of waiver agreements.

Alexander “Sandie” Pendleton is a shareholder with Kohner, Mann & Kailas S.C. He counsels clients that provide recreational opportunities, services, and products, and writes on waiver law issues at http://releaselaw.com/news.html.

Users of waiver agreements – many of whom continue to ignore the issue of bargaining in their waiver agreements – should take note of this element of the court’s decision, and ensure that their agreements do not ignore this factor.

Overbroad

As to the “overbroad” factor, here the health club clearly made a fatal mistake, when it failed to include a carve-out for claims based on reckless or intentional conduct. The law in Wisconsin has been clear for many years that a waiver that attempts to cover reckless or intentional conduct claims is void.7

Two of the comments by the Brooten court,however, suggest that any attempt to extend a waiver beyond ordinary negligence claims will result in the agreement being held overbroad. Those two comments are as follows:

“It is well-settled that an exculpatory clause may only release claims of negligence; it cannot, under any circumstance – bargained for or not – preclude claims based on reckless or intentional conduct.”8 (Emphasis added.)

The italicized text above sets forth a new concept under Wisconsin waiver law, which concept is not supported by the authority and cases cited by the court.10

Although likely dicta, the court’s new concept places drafters and users of waiver agreements in a difficult situation. Drafting a waiver agreement to cover only negligence claims potentially leaves the recreational-provider exposed to creative pleading by plaintiff’s counsel (so as to include such claims as breach of contract, misrepresentation, or safe place liability); on the other hand, drafting a waiver agreement to cover all claims, except for those for harm caused intentionally or recklessly, potentially leaves the recreational-provider exposed to an argument that under Brooten, the entire agreement must be held void as overbroad.

Users of waiver agreements – an amazing number of which continue to seek to have their waiver agreements cover “all claims” – should take note of this element of the court’s discussion of the “overbreadth” element, and review and revise their forms to ensure they are designed to walk that fine line between broad enough, and not too broad.

Failure to Alert the Signer to the Nature and Significance of the Agreement

As to the third factor, this was based on the court’s concluding that the “defend-and-indemnify” clause included in the agreement was not sufficiently brought to the gym member’s attention.11 The court found significant the facts that 1) the title of the document did not refer to such a clause (the title was “Waiver and Release of Liability”), 2) the capitalized language above the signature line did not refer to such a clause, and 3) the clause itself in the body of the agreement was not conspicuous.12 “We are satisfied that an ordinary consumer would not contemplate that ‘defend and indemnify’ language buried in the middle of the form’s text would require him or her to provide a legal defense for Chetek Fitness and to pay Chetek Fitness’s share of damages in the event a third party sued Chetek Fitness.”13 Reading between the lines, one gets the impression that the court was offended by the health club’s inclusion of the indemnification clause in the agreement form.14

Users of waiver agreements – many of whom make no attempt to make conspicuous to users an indemnification provision, or explain the meaning or significance of such a clause – should take note of this element of the court’s decision, and ensure that their agreements are drafted in such a way so as not to make the same mistakes the court identifies in Brooten.

Conclusion

While Wisconsin courts have never said that all waiver agreements are per sevoid, the Brooten decision is another example of a Wisconsin case holding that such agreements are disfavored, and must withstand very close scrutiny before they will be upheld.

10 Specifically, the six Wisconsin decisions and the Restatement (Second) of Contracts section cited by the court in ¶ 10 of the decision do not support the Brooten court’s statement that it “is well-settled that an exculpatory clause may only release claims of negligence.” The court’s comment can be considered dicta, as all the court needed to say to reach the outcome it did was that because the waiver form language was broad enough to cover claims for harm caused intentionally or recklessly, it was therefore void. If that is all the court had said, that comment would be supported by the authority cited by the court (the six cases and the Restatement section cited by the court in ¶ 10).